This is, in fact, the crux of the argument: It isn't enough to simply establish clear rules in a trading center. Governments can only successfully combat speculators if they coordinate their efforts worldwide and remove the cloak of secrecy from their commodities transactions.
As long as this fails to happen, the price of copper will remain unpredictable and industry will be at the mercy of speculators. Companies will no longer be able to assume that copper will be expensive when it's scarce and cheap when it's available in abundance.
Speculation destroys the basic signaling function that prices have in a market economy, says Heiner Flassbeck, chief economist at the United Nations Conference on Trade and Development (UNCTAD). Although a lot of money moves around as a result of price distortions, speculation doesn't create any real value, says Flassbeck. "The only thing that's created is an illusion of value."
Making Life Difficult for Everyone
In the end, the popular assessment that speculators are the purest of capitalists is by no means correct. In truth, they are the biggest enemies of the market, because they undermine its central mechanism, the efficient balancing of supply and demand. In doing so, they make life difficult for everyone: for industry, which can no longer predict how expensive its raw materials will be; for consumers, who are forced to bear the costs; and, finally, for copper producers, who face more risk when planning ahead.
When the executives at CODELCO in Santiago make investment decisions today, it will be another three to five years before the results become visible. That's how long it takes to develop a new mine or expand an existing mine. The company plans to invest about $15 billion by 2015, but its executives have never been so uncertain about whether their predictions are correct.
One thing is clear: Production costs will continue to rise. Now that deposits near the surface, which are easier to mine, are becoming depleted, mining companies are forced to dig deeper and deeper pits.
